Corn growers united against lifting import tariff on ethanol

It's not often that the National Corn Growers Association and the American Corn Growers Association come down on the same side of an issue. When they do, you can bet that farmers may be getting gored by somebody.

In this case, the conservative NCGA and the more progressive ACGA, along with Farm Bureau and the Renewable Fuels Association, are opposing efforts by House leaders and the Bush administration to suspend import tariffs on ethanol to supposedly bring down prices of the alternative fuel.

Both the NCGA and the ACGA said that not only would removing the tariff reduce corn prices and negatively impact a growing U.S. industry, but it would also subsidize ethanol producers in countries like Brazil.

The tariff is designed to offset the tax incentive gasoline refiners receive for each gallon of ethanol they blend, no matter where the ethanol originates, according to National Corn Growers First Vice President Ken McCauley. Removing the tariff would mean ethanol producers in Brazil, for example, would have access to American taxpayer dollars.

“Ethanol can be imported and is being imported into the country,” said McCauley, who farms 3,500 acres of corn with his wife and son in White Cloud, Kan. “Lifting this tariff will not decrease the price seen at the gasoline pump. However, eliminating the tariff will negatively impact a growing U.S. ethanol industry.”

The American Corn Growers Association's Larry Mitchell said removing the tariff would lower corn prices at least 6 cents per bushel for every 1 billion gallons of ethanol imported into the United States. That works out to about $666 million in lost income for U.S. farmers.

“We are very alarmed by recent announcements from the Bush administration that they want to suspend the current import tariff on ethanol and are looking for ways to increase ethanol imports to the United States,” said Mitchell, the ACGA's chief executive. “Importing ethanol is not the proper course to treat what the president diagnosed as an ‘addiction to imported oil.’”

Mitchell says the ACGA calculates that the other part of the administration's plan — paying the 51-cent per gallon blenders' tax credit to gasoline distributors on the imported ethanol — would cost taxpayers $1.7 billion for every billion gallons of imported ethanol.

House Majority Leader John Boehner of Ohio and Sens. John Kyl, R-Ariz., and Diane Feinstein, D-Calif., have said that a temporary reduction in the ethanol import tariff would help reduce gasoline prices.

“We don't have enough ethanol in production today,” said Boehner. “It's coming on board, but if we were to temporarily reduce the tariff on ethanol coming into our country, I think that would ease the pressure out there.”

But Iowa Sen. Charles Grassley and South Dakota Sen. John Thune, both Republicans, said lifting the tariff would be a “victory for the oil companies, a kick in the face of rural America and would leave consumers with the same high gas prices we have today.

“This is not the time to call into question the role that home-grown renewable fuels can play in reducing prices at the pump or our dangerous dependence on foreign oil,” they said in a joint statement.

Farm Bureau, the National Corn Growers and the Renewable Fuels Association wrote a letter to the House and Senate leadership urging them to oppose efforts to remove the import tariff.

It said current U.S. ethanol production is more than enough to meet the estimated 130,000 barrels per day needed to replace MTBE, a gasoline additive that has been blamed for groundwater contamination discoveries in a number of states.

The groups said more than 302,000 barrels are being produced daily by the 97 ethanol refineries located in the United States. More than 2.2 billion gallons of additional production capacity is expected to come online within the next 18 months from 44 plants under construction. The United States is on track to produce 4.5 billion gallons of ethanol this year, according to the RFA.

The groups also noted that removing the tariff would have a “chilling affect on the financial markets as well.” With growing investment from Wall Street and Main Street in corn-to-ethanol and interest in cellulosic ethanol production rising, removing the tariff would send a “devastating signal to financial markets.”

The NCGA said it was also appreciative of statements like those Sen. Dick Durbin, D-Ill., has made in an appearance on ‘Meet the Press’ and in a “Dear Colleague” letter reiterating his strong support for keeping the secondary tariff on imported ethanol.

“Sen. Durbin sees the negative impact lifting the tariff would mean as it pertains to jobs, the economy and the future of a growing ethanol industry both in Illinois and nationwide,” said McCauley.

National Corn Grower leaders say they believe the increase in ethanol imports created by lifting the tariff would be filled mainly by Brazil, which has been involved in several dust-ups involving U.S. agriculture. In one of those, Congress voted to change the U.S. cotton program to comply with a WTO ruling in a case brought by Brazil.

The Caribbean Basin Initiative already allows Brazil a ready opportunity to export ethanol tariff free, providing up to 7 percent of the U.S. supply. “In fact, Brazil is already on a pace to break all records for exports of ethanol to the U.S., nearly doubling the amount it exported to the United States last year,” said NCGA CEO Rick Tolman. “With the Caribbean Basin option and the high price of fuel, the import tariff has not been a constraint to ethanol exports to the United States by Brazil.”

Tolman noted the Brazilian ethanol industry already receives many subsidies from its own government. “In essence, if we drop the tariff, U.S. taxpayers will be further subsidizing already heavily subsidized Brazilian ethanol.”